Author Topic: Cheap and Flexible home purchase  (Read 1207 times)

Ottawa

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Cheap and Flexible home purchase
« on: September 12, 2014, 09:07:54 AM »
Hi all,

We have a plan as follows (similar to what MMM recently did with his house move):

Current (Town) House: value  ~300K (mortgage free)

We want to move into a small single home.  The prices in the general area for this type of property range from 375K (fixer upper) to 550K (fixed up).  We would be aiming at the under 400K segment.

We wish to stay in the current house during any mandatory renovations (i.e. gutting basement/redoing floors/opening up floor plan/new windows/converting from electric-->gas etc).  This may require 3 months of dual home ownership.

What is the best way to actually buy the new home under the above condition?  I KNOW NOTHING about this process.  I presume one can get a massive short term loan using the existing home as a secure line of credit?  This would cost X per month to carry...perhaps some actual cash needs to be put down as well..does one go through the bank?  Mortgage broker? 

Thoughts? and Thanks! in advance

arebelspy

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Re: Cheap and Flexible home purchase
« Reply #1 on: September 12, 2014, 11:22:16 AM »
It will depend on your situation.

I'd suggest you talk to a mortgage broker to see if you can qualify to purchase it with a mortgage as a primary (even though you may not move in right away) - worst case you have to purchase it as a second home and pay most it off when you sell your current place.

Either way, I'd suggest you talk to a mortgage broker to figure out what is best for your situation.
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DoubleDown

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Re: Cheap and Flexible home purchase
« Reply #2 on: September 12, 2014, 12:52:48 PM »
Are you sure you want to maintain two mortgages while renovations are done? I realize it can be a PITA to live through construction, but it might not be as disruptive as you imagine. For example, basement renovations -- meh, would that even affect you? Same goes for moving walls around or opening other parts of the house -- no big deal. If you work, you'll likely be gone during the day when most of the construction is happening anyhow.

Bathrooms and kitchens are more problematic, but not that horrible to live through. I moved into our current house and then we had major renovations done. It wasn't so horrible. If you have a decent contractor that minimizes the unavailability of major systems and moves in an orderly fashion (for example, keep one bathroom intact while gutting and renovating the other), it's really not so bad. If you are really opposed to being there while the kitchen is torn apart for a week, you could likely move into an extended-stay hotel for that time at probably 1/10th the cost of 3+ months of dual mortgages. For us, it was no big deal to use a microwave for a few days and wash dishes in another sink.

The significant upside of course is not having to pay both mortgages (particularly if renovations go slower than planned, which is almost always). Also, being on site to monitor daily work and progress is another advantage. And, as you're noting, you won't have to worry at all about bridging the two house loans.